And if you really want to get depressed, then look at the long-run fiscal forecasts for the United States and other industrialized countries. Things are going to get worse. Much worse.

Most nations are heading toward a Greek-style fiscal crisis. And while the United States is in better shape than many European welfare states today, our long-run outlook is actually worse according to the International Monetary Fund.

Speaking of the IMF, let’s discuss some very bad news. It’s about Albania, so it may not seem very important, but it’s quite symbolic of the destructive impact of international bureaucracies.

As you can see from this Reuters report, the IMF basically bribed Albania to get rid of its flat tax.

“The IMF staff and the authorities reached an agreement on the IMF supporting their economic programme with financial assistance which could be delivered over a period of three years under an extended fund facility with access of about 300 million euros,” the IMF’s mission chief, Nadeem Ilahi, told reporters. …The three-month-old Socialist government will scrap a flat tax of 10 percent in the next fiscal year in January and raise the corporate tax to 15 percent from 10 percent. Also, the income tax for high-earners will rise to rates of 13 percent and 23 percent from 10 percent currently. …”The package of economic policies … supported by the IMF programme should make Albania an economy that is reforming, is open to foreign investors. … A lot of the reforms the authorities are planning are consistent with what the European Union has been asking for,” Ilahi said.

So think about what this means. The IMF is hurting global growth by distorting the allocation of capital. It’s hurting Albanian growth by enabling more government spending. And it’s hurting Albanian growth by forcing higher tax rates.

And then the IMF bureaucrat in charge, Mr. Ilahi, actually has the nerve to assert that all this bad policy will make Albania “open to foreign investors.” Yeah, sure. Investors are always flocking to nations that are actively increasing the burden of government. I guess that’s why France is such an economic dynamo and Hong Kong is suffering from stagnation…at least according to the IMF model anyway.

Keep in mind, by the way, that Mr. Ilahi (like all international bureaucrats) gets a tax-free salary! So I guess we shouldn’t be too surprised that he is completely clueless about the real-world impact on the destructive policies he has foisted upon Albania.

And then these profligate politicians decided to throw their taxpayers under the bus in exchange for a pile of additional loot from the IMF.

The real victims are the people of Albania. They suffered decades of communist enslavement. But even after the collapse of the Soviet Empire, they’ve never enjoyed a free-market, small-government economy. But with the flat tax, they had at least one pro-growth policy.

11 Responses

The law of probabilities suggests that one should be pessimistic about any one country. After all, Thomas Jefferson’s statement —spoken from the serendipitous privilege of a country that being newly discovered could reset the government entropy counter — is correct. The natural tendency of voter-lemmings, combined with the inherent interests of politicians who by nature live off mandatory collectivism, is to self-destruct. Coming to this realization is depressing, but very useful in personal planning.

But human cultural evolution cannot be stopped. Even if by a process akin to random biological mutation, some countries will break through the self destructive juggernaut of voter-lemming instincts and innate politician /international bureaucracy interests. But while those countries that escape are the only relevant natural selection branch in human evolution, finding these countries is as simple as picking the next Apple Inc.

But, I believe that these countries will show through. What worries and depresses me in the medium term is that: if western world voter-lemmings continue down this vicious cycle of reacting to compounding decline by ever flattening the effort-reward curve, then the countries that break through may not be democracies.

[…] The IMF is a statist international bureaucracy that pushed for bad policy, both in America and other nations. Last year, I reported that the Obama Administration proposed to give the IMF more money and […]

[…] The IMF is a statist international bureaucracy that pushed for bad policy, both in America and other nations. Last year, I reported that the Obama Administration proposed to give the IMF more money and […]